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MIDDLE EAST AND NORTH AFRICA REGION: WHAT PROGRESS AFTER THE “ARAB SPRING”?

- Economic activity is gaining strength in Middle East and North Africa region
- Strong growth momentum in GCC countries continue, economic recovery in oil importers is on track
- Oil exporters successfully diversified their economies, but they are still heavily dependent on hydrocarbon sector in terms of budget and export revenues
- Oil importers face higher risks of geopolitical tensions
- Morocco and Tunisia seen benefiting from European recovery, higher political stability
After a period of political and social turmoil, the economic activity is gaining strength in the Middle East and North Africa region. The growth is expected to stand at 2.6 percent in 2014 and to accelerate to 3.2 percent in 2015 on the back of global economic recovery and preliminary signs of political consensus in some countries of the region. However the growth performance will continue to stand below the 2000-2010 average of 5.4 percent.
Middle East and North Africa region growth performance
The GCC countries are expected to grow 4.2 percent in 2014 and 4.1 percent in 2015, leading the economic growth in the region on the back of robust non-hydrocarbon activities and large budget surpluses. The diversification policies helped the GCC region to support the non-hydrocarbon industries. Overall in GCC countries, the share of the hydrocarbon sector’s contribution to GDP declined from 41 percent in 2000 to 33 percent in 2014. These countries also benefit from solid financial fundamentals such as huge assets in their sovereign wealth funds and external surpluses. However the sharp decline in oil prices would weigh on growth performances and fiscal balances in 2015.
On the oil importers (Egypt, Jordan, Lebanon, Morocco, Tunisia) side, the recovery in tourism, investor’ confidence and exports, supported by the recovery in European countries, are expected to contribute positively to the growth performance. Besides, many oil importing countries have announced stimulus packages to support the economic activity in the aftermath of social unrests. Oil importers are expected to grow 2.5 percent in 2014 and 3.4 percent in 2015. Yet these countries suffer from high unemployment, budget and current account deficits. The public debt levels are still high. However the situation is expected to improve on the back of recovery in economic activity and the incentive reforms.
On the other hand the regional turmoil would weigh heavily on the economic performance of some countries like Iraq and Libya. Iraq and Libya are expected to contract 2.5 percent and 19.8 percent respectively in 2014.
“The divergence between the oil exporters and oil importers persists and the real growth rates remaining below the 2000-2010 average for both groups. Nevertheless most of the GCC countries were able to stay out of the geopolitical tensions which allowed them to continue to attract foreign investments and record solid growth rates. They continue to invest heavily in non-oil sectors to transform their economies. This also reduces their vulnerability to a sharp decline in energy prices. Therefore Coface assessments of business environment are better in these countries. But there are still some challenges that need to be addressed regarding future deterioration of fiscal balances, high level of bureaucracy and improvement of transparency. The impact of the social and political turmoil was heavier for oil importers. They still suffer from political uncertainties, high unemployment and public debt, deficit of current account balance and fiscal imbalances. However these countries are also making some progress in terms of structural reforms to improve fiscal performance, labor market conditions and business environment. Tunisia and Morocco are expected to have better economic performance due to the economic recovery in Europe,” said Seltem IYIGUN, Economist for the Middle East and North Africa region at Coface.
Hydrocarbon sector: Regional strength exposed to price volatility, regional tensions weigh

Seltem IYIGUN, Economist for the Middle East and North Africa region at Coface
The GCC is an oil-based region and possesses the largest proven reserves in the world. Kuwait, Qatar, Saudi Arabia and the United Arab Emirates represented nearly 41 percent of the Organization of Petroleum Exporting Countries (OPEC) proven crude oil reserves at the end of 2013. This sector is the major source for the GCC countries in terms of exports and budget revenues. The hydrocarbon revenues also provide the necessary funding for the development of other industries. The declining oil prices may result in a slide in budget and export revenues. It may also play against the investors’ confidence for some projects through the squeeze of corporate profit margins and result in delays or cancellations. Coupled with higher fiscal break-even prices, this can make rising social and investment spending unsustainable. Lower capital expenditures may weigh on growth performances.
Textile sector: recovery after the instability
The textile and apparel sectors are one of the traditional industries in the North African countries as it provides an important part of employment and industrial production. In Morocco, the textile sector is the largest employer of the industrial workforce with 40 percent. The sector accounts for 10 percent of GDP and 20 percent of exports. In Tunisia, the textile and clothing sector is the second largest exporter in the manufacturing industries as it accounts for 19 percent of the total export of the country. The sector provided 7 percent of the total employment in the first quarter of 2014. The concentration of textile exports in European countries, the bargaining power of the clients over the producers, limited access to financing and political instability constitute main risks in this sector.
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ECB launches small climate-change unit to lead Lagarde’s green push

FRANKFURT (Reuters) – The European Central Bank is setting up a small team dedicated to climate change to spearhead its efforts to help the transition to a greener economy in the euro zone, ECB President Christine Lagarde said on Monday.
Lagarde has made the environment a priority since taking the helm at the ECB, taking a number of steps to include climate considerations in the central bank’s work as the euro zone’s banking watchdog and main financial institution.
She is now creating a team of around 10 ECB employees, reporting directly to her, to set the central bank’s agenda on climate-related topics.
“The climate change centre provides the structure we need to tackle the issue with the urgency and determination that it deserves,” Lagarde said in a speech.
She said that climate change belonged in the ECB’s remit as it could affect inflation and obstruct the flow of credit to the economy.
The ECB said earlier on Monday it would invest some of its own funds, which total 20.8 billion euros ($25.3 billion) and include capital paid in by euro zone countries, reserves and provisions, in a green bond fund run by the Bank for International Settlement.
More significantly, ECB policymakers are also debating what role climate considerations should play in the institution’s multi-trillion euro bond-buying programme.
So far the ECB has bought corporate bonds based on their outstanding amounts but Lagarde has said the bank might have to consider a more active approach to correct the market’s failure to price in climate risk.
“Our strategy review enables us to consider more deeply how we can continue to protect our mandate in the face of (climate) risks and, at the same time, strengthen the resilience of monetary policy and our balance sheet,” Lagarde said.
(Reporting by Balazs Koranyi; Editing by Francesco Canepa and Emelia Sithole-Matarise)
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What to expect in 2021: Top trends shaping the future of transportation

By Lee Jones, Director of Sales – Grocery, QSR and Selected Accounts for Northern Europe at Ingenico, a Worldline brand
The pandemic has reinforced the need for businesses to undergo digital transformation, which is pivotal in the digital economy. In 2020, we saw the shift to online and cashless payments accelerated as a result of increased social distancing and nationwide restrictions.
The biggest challenge on all businesses into 2021 will be how they continue to adapt and react to the ever changing new normal we are all experiencing. In this context, what should we expect this year and beyond, in terms of developments across key sectors, including transport, parking and electric vehicle (EV) charging?
Mobility as a service (MaaS) and the future of transportation
Social distancing and lockdown measures have brought about a real change in public habits when it comes to transportation. In the last three months alone, we have seen commuter journeys across the globe reduce by at least 70%, while longer-distance travel has fallen by up to 90%. With it, cash withdrawals for payment has drastically reduced by 60%.
Technological advancements, alongside open payments, have unlocked new possibilities across multiple industries and will continue to have a strong impact. Furthermore, travellers are expecting more as part of their basic service. Tap and pay is one of the biggest evolutions in consumer payments. Bringing ease and simplicity to everyday tasks, consumers have welcomed this development to the transport journey. In-app payments are also on the rise, offering customers the ability to plan ahead and remain assured that they have everything they need, in one place, for every leg of their journey. Many local transport networks now have their own apps with integrated timetables, payments, and ticket download capabilities. These capabilities are being enabled by smaller more portable terminals for transport staff, and self-scanning ticketing devices are streamlining the process even further.

Lee Jones
Ultimately, the end goal for many transport providers is MaaS – providing an easy and frictionless all-encompassing transport system that guides consumers through the whole journey, no matter what mode of travel they choose. Additionally, payment will remain the key orchestrator that will drive further developments in the transportation and MaaS ecosystems in 2021. What remains critical is balancing the need for a fast and convenient payment with safety and data privacy in order to deliver superior customer experiences.
The EV charging market and the accelerating pace of change
The EV charging market is moving quickly and represents a large opportunity for payments in the future. EVs are gradually becoming more popular, with registrations for EVs overtaking those of their diesel counterparts for the first time in European history this year. What’s more, forecasts indicate that by 2030, there will be almost 42 million public charging points deployed worldwide, as compared with 520,000 registered in 2019.
Our experience and expertise in this industry have enabled us to better understand but also address the challenges and complexities of fuel and EV payments. The current alternating current (AC) based chargers are set to be replaced by their direct charging (DC) counterparts, but merchants must still be able to guarantee payment for the charging provider. Power always needs to be converted from AC to DC when charging an electric vehicle, the technical difference between AC charging and DC charging is whether the power gets converted outside or inside the vehicle.
By offering innovative payment solutions to this market segment, we enable service operators to incorporate payments smoothly into their omnichannel customer experience that also allows businesses to easily develop acceptance and provide a unique omnichannel strategy for EV charging payments. From proximity to online payments, it will support businesses by offering a unique hardware solution optimized for PSD2 and SCA. It will manage both near field communication (NFC) cards and payments from cards/smartphones, as well as a single interface to manage all payments, after sales support and receipt with both ePortal and eReceipts.
Cashless options for parking payments
The ‘new normal’ is now partly defined by a shift in consumer preference for cashless, contactless and mobile or embedded payments. These are now the preferred payment choices when it comes to completing the check-in and check-out process. They are a time-saver and a more seamless way to pay.
Drivers are more self-reliant and empowered than ever before, having adopted technologies that work to make their life increasingly efficient. COVID-19 has given rise to both ePayment and omnichannel solutions gaining in popularity. This has been due to ticketless access control based on license plate recognition or the tap-in/tap-out experience, as well as embedded payments or mobile solutions for street parking.
These smart solutions help consider parking services more broadly as a part of overall mobility or shopping experience. Therefore, operators must rapidly adapt and scale new operational practices; accept electronic payment, update new contactless limits, introduce additional payments means, refund the user or even to reflect changing customer expectations to keep pace.
2021: the journey ahead
This year, we expect to see an even greater shift towards a cashless society across these key sectors, making the buying experience quicker and more convenient overall.
As a result, merchants and operators must make the consumer experience their top priority as trends shift towards simplicity and convenience, ensuring online and mobile payments processes are as secure as possible.
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Opportunities and challenges facing financial services firms in 2021

By Paul McCreadie, Partner at ECI Partners, the leading growth-focused mid-market private equity firm
Despite 2020 being an enormously disruptive year for businesses, our latest Growth Index research reveals that almost three quarters (74%) of mid-market financial services companies remained resilient throughout the pandemic.
This is positive news, especially when taking into account the economic disruption that financial services firms have had to go through since the crisis began. No doubt 2021 will also hold its own challenges – as well as opportunities – for firms in this sector.
Challenges outlook
Unsurprisingly, the biggest short-term concern for financial firms for the year ahead involved changing pandemic guidance, with 42% citing this as a top concern. With the UK currently experiencing a third lockdown many financial services businesses will have already had to adapt to rapidly changing guidance, even since being surveyed.
Businesses will also be considering the need to invest in working from home operations, and there may be uncertainty over re-opening offices on a permanent basis. According to the research 30% of financial services firms are planning to adopt remote working on a permanent basis, so decisions need to be made now about whether they invest more in enabling staff to do this, or in their current office premises.
Due to Brexit, UK financial services firms are no longer able to passport their services into Europe, which may cause problems, particularly in the next 12 months as the Brexit deal is ironed out and the agreement is put into practice. Despite this, Brexit was only cited by 24% of financial firms as a short-term concern. While it’s comforting to see that UK financial firms aren’t hugely concerned about Brexit at this juncture, it is going to be vital for the ongoing success of the industry that the UK is able to get straightforward access to Europe and operate there without issue, otherwise we may see these concern levels rise.
Looking ahead to longer-term concerns for financial services businesses, the top concern was global economic downturn, of which 40% of firms cited this as a worry when looking beyond 2021.
Investing and adopting tech
Traditionally, the financial services sector has been slow to adopt digital transformation. Issues with legacy systems, coupled with often large amounts of data and a reluctance to undertake potentially risky change processes, have meant many firms are behind the curve when it comes to technology adoption. It’s therefore promising to see that so much has changed over the last year, with 45% of financial services firms having invested in AI and machine learning technology – making it the top sector to have invested in this space over the last 12 months.
One business that exemplifies the benefits of investing in machine learning is Avantia, the technology-enabled insurance provider behind HomeProtect. The business has undergone a large tech transformation in the last few years, investing in an underlying machine learning platform and an in-house data science team, which provides them with capabilities to return a quote to over 98% of applicants in under one second. This tech investment has allowed them to become more scalable, provide a more stable platform, improve customer service and consequently, grow significantly.
This demonstrates how this kind of tech can help businesses to leverage tech in order to offer a better customer experience, and retain and grow market share through winning new customers. This resilience should combat some of the concerns that firms will face in the next year.
Additionally, half (51%) of financial services firms have invested in cybersecurity tech over the last year, which allows them to protect the platforms on which they operate and ensure ongoing provision of solutions to their customers.
International resilience
Clearly, there is a benefit of international revenues and profits on business resilience. In practice, this meant that businesses that weren’t internationally diversified in 2020 struggled more during the pandemic. In fact, the businesses considered to be the least resilient through the 2020 crisis were three times more likely to only operate domestically.
Perhaps an attribute towards financial services firms’ resilience in 2020, therefore, was the fact that 53% already had a presence in Europe throughout 2020 and 38% had a presence in North America. This internationalisation gave them an advantage that allowed them to weather the many storms of 2020.
Looking at how to capitalise on this throughout the rest of 2021, half (51%) of are planning overseas growth in Europe over the next 12 months, and 43% in North America. Further plans to expand internationally is not only a good sign for growth, but should further increase resilience within the sector.
Conclusion
While there are many concerns, the fact that financial services businesses are investing in technology like AI and machine learning, as well as still planning to grow internationally, means that they are providing themselves with the best chances of dealing with any upcoming challenges effectively.
In order to maintain their growth and resilience throughout the next 12 months, it’s imperative that they continue to put their customers first, invest in technology and remain on the front foot of digital change.